What do you do when you owe money to people you can’t pay? What options do you have?
Let’s take a look at your options. You cannot undo the past. You cannot singlehandedly improve the economy. So let’s move forward. Figure out your alternatives.
Two of the three alternatives below are acceptable, and will make your life better. One of them is clearly not.
Option 1: Negotiate
You can try to negotiate with the people you owe and request more time to pay, or request to make smaller payments over a greater period of time.
When creditors know you are in a position where you may have to file bankruptcy, creditors may be willing to negotiate. They would rather receive something than nothing.
Talk to creditors about what they will accept, and make sure you can comply with the terms you offer.
Option 2: File Bankruptcy
Talk to someone about bankruptcy alternatives, preferably a lawyer. Find out your options.
There are bankruptcy proceedings where some of your assets may be liquidated to repay debts and the remaining debts are forgiven. Some people don’t have the type of assets that may be liquidated, and therefore debt is just forgiven.
For those who do not qualify to simply have all debt forgiven, there are bankruptcy proceedings where you put together a feasible repayment plan over a period of years, usually three to five, to repay some or all debts. There may be some remaining debt that will be forgiven.
Even if creditors don’t like this idea and wouldn’t negotiate this, ultimately it is the court that approves or denies such a plan after a bankruptcy petition has been filed, not the creditor. The creditor is given an opportunity to object, but the court makes the decision.
Option 3: Ignore the Creditors, and Lose More Than You Knew Was at Stake
If you ignore a creditor completely, the creditor will go to court and get a judgment against you.
Next the creditor will get a court order requiring you to tell the creditor all about your finances and your assets.
If you ignore this order, the creditor will ask the court for a show cause hearing. A show cause hearing is a hearing where the court asks you to show cause, or give a good reason, for your failure to answer the financial questions of the creditor.
If you appear at the hearing, the court can fine you, jail you, or both, as a sanction for not responding to the creditors financial questions after the court ordered you to do so. If you provide a good reason for your failure to respond, the court will simply give you another ten days to respond – you cannot get out of the requirement that you provide this information.
If you ignore the hearing and don’t appear, the creditor simply fills out a form, an affidavit, informing the court that there was a hearing scheduled, you were informed about the hearing, and you failed to appear for the hearing.
The court will then issue a warrant for your arrest.
Choose Option 1, Option 2, or Both – Don’t Choose Option 3
You have options when you can’t repay your debt. Be proactive, and figure out the best option for you.
Running from your debt seems easiest at first, but it will not be in the long run.
Negotiation and bankruptcy work for many, many people.